Unicorporated Associataions Notes

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Unicorporated Associataions Revision

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GIFTS TO UNINCORPORATED ASSOCIATIONS Introduction: People frequently want to may payments to clubs and associations, whether by way of membership fee ('subscription'), gift, bequest, or purchase (e.g. of a raffle ticket). It's not as straightforward as it seems, because for payment to be made, the payee must be capable of receiving it, i.e. of owning the money given. The law says that people can own property, but that organisations can't, unless they're "incorporated" [i.e. they lack legal personality]
 Trading companies are generally incorporated, and so are some clubs, so payment to these can be validly made.
 But many clubs are unincorporated, so can't own property, so no payments can be made to them. Judges have, however, developed a practice of regarding apparent payments to unincorporated clubs as some other, valid, kind of disposition having an effect similar to the abortive direct payment. There have been two principle approaches:
   Purported gift to the club may be read as a trust for the club's purposes o E.g. some of the payments in Re West Sussex Constab's Widows were treated in this way. This doesn't involve treating this gift, in turn, as a gift to club's members beneficially, although that further step was taken in Re Lipinski. o A trust to promote a charitable purpose is valid without more, so a purported gift to a club with charitable objects will unproblematically be valid as a trust for those objects. o A trust to promote a non-charitable purpose is valid if there are people benefited by, or perhaps otherwise interested in, its performance (Re Denley's)
 Most club members will be benefited by the performance of a trust for their club's purposes, and surely all will be interested in the performance of such a trust o Therefore, gifts read as trusts for the purposes will normally be valid (e.g. West Sussex Constabulary)
 Or, purported gift to a non-charitable club may be read as a gift to its members (whether directly, or via a trust of which they are the beneficiaries) o A gift to the members in their personal capacity would be technically unproblematic, but it wouldn't be a close surrogate for the purported gift to the club o So, to achieve a better surrogate, the gift is taken as being to the members "on behalf of the club" o Between the members of the club, there'll be a contract (express or implied): the club's rules, which will, expressly or impliedly, govern the use which members can make of any money they own on club's behalf - essentially requiring them to spend it only on club's purposes. o So income regarded in this way will be owned by the members, but caught by this contractual obligation (Re Recher's)

o This approach is often referred to as 'the contractual analysis'. Cases using it include Re West Sussex Constab, Re Sick and Funeral Soc, Re Buckinghamshire Constabulary, Hanchett-Stamford Sometimes judges have no choice between the two approaches. A contract obliging me to make a payment 'to the club' can usually be read only as requiring a payment under the contractual analysis:
 E.g. buying a £1 raffle ticket - this is a contract for the ticket. I must give £1 absolutely - that's my contractual obligation in buying a ticket. Settling £1 on trust for the club's purposes won't be good enough. That £1 then goes to the club and is caught by their rules.
 The same goes for members' subscriptions. But where donations have been voluntarily made - inter vivos or by will - the donor can choose the terms on which to make payment, so both approaches, in principle, are viable:
 Although note that the purpose trust approach is 'doubtfully plausible' for money placed in a collecting box - the small sum involved and the anonymity of the donor make it more realistic to see him as paying the money absolutely, i.e. under the contractual analysis. The essence of this point is taken, but its implications not fully absorbed, in Re West Sussex constab. What about where the donor has expressly chosen neither, but has purported to make a payment to the club? Should use the analysis that "most closely reflects the failed intended disposition" Under the purpose trust approach, there's a trust obligation to spend the money on the club's purposes, The money doesn't belong to the members in any sense, and they can't claim it for themselves or otherwise change the purposes on which it'll be spent from those purposes regarded as designated by the donor (which will be club's existing purposes). Under the contractual analysis, however, the money belongs to the members. What stops them taking it home as their own property is the relevant club rule? Since this is a contract made amongst themselves, they can change its terms or terminate it by mutual consent, which would then enable them to spend the money as they wish. This is the main difference tween the two approaches. [cf Lipinski where judge didn't notice the approaches were different, and treated them as the same]
Is the purpose trust approach the more faithful one to donor's intentions, since it sticks more firmly to original club's purposes? Perhaps not: the donor sought to make a gift to the club; it is "strongly arguable that in doing so he meant the members to settle the use of the money thereafter". Which is more like the contractual approach.

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In practice, a judge who has to to use the contractual analysis regarding part of a club's income (esp. members' subscriptions) may well choose to use it for the rest, for simplicity. o E.g. see Re Buckinghamshire constab, but cf West Sussex He's also "likely to be swayed by the relative attractiveness of the results that the rival analyses would throw up in the circumstances that have emerged: often, upon the club's dissolution"

If a gift is treated as made on a purpose trust, failure of that purpose will (unless giver has provided otherwise) generate a resulting trust, requiring that the surviving amount be repaid to the giver. Where the gift was small, or anonymous, or made some time previously by someone not since connected with the club, effecting such a repayment will be difficult. But if a gift's treated as made under contractual analysis, on the club's dissolution it'll go in equal shares to the members at the time of the dissolution, unless they agree otherwise. This will normally be easy to effectuate, esp. in comparison with a resulting trust solution. In that case, it will "be expedient to have adopted the contractual analysis in the first place" EFFECT OF THE GIFT D+V: identify 5 methods of property-holding relating to unincorporated associations:
 Charitable trust (but only if there's a recognised charitable purpose; and note that if the association has a rule that on dissolution, the property will be divided between the members, this negates the charitable purpose)
 Non-charitable purpose trust
 For members at the time of the transfer
 On trust for present and future members
 For members subject to their existing contractual rights Unincorporated associations were once considered to be an exception to general principle that non-charitable purpose trusts are void, but this exception was rejected by PC in Leahy Leahy v AG for NSW [1959]
Facts: a testator left property to be held on trust for an order of nuns, which was an unincorporated association. Privy Council (per Viscount Simonds): this was a trust for the non-charitable purposes of the order, held to be void:
 In law, a gift to a non-incorporated association is simply a gift to its members at the date of the gift, as joint tenants or tenants in common (hence the 'prudent conveyancer' provides that receipt by the proper officer - e.g. treasurer - will be sufficient).

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What is meant, then, when a gift is made to individuals comprising the community 'for the benefit of the community'?
o If it's a gift to individuals, each is entitled to his distributive share (unless they've bound themselves by the rules of the society that say money shall go to some other purpose). o So, what is added by the words 'for the benefit of the community', then? If the intention is that they import a trust, who are the beneficiaries?
 If the beneficiaries are present members, then the words add nothing, because the money was going to them anyway.
 If some other purpose is intended, the gift must be void, because this is uncertain and leads to a perpetuity. The question, then, is whether even if this is an absolute gift to the individual members, this is invalid because it is in the nature of an endowment, and tends to a perpetuity, or invalid for another reason. Prima facie, a gift to a voluntary association for the general purposes of the association is an absolute gift, a good gift. This is because it can be upheld "as a gift to the individual members", even though given for general purposes. The words 'for the general purposes of the association' can't import a trust, because there are no beneficiaries, and you need beneficiaries unless the purposes are charitable. In this case, then, is this a gift to the individual members of the Order at the date of the testator's death so they can dispose of it as they see fit? No, because he intended to create a trust, rather than a gift (and a trust for the purposes of a non-charitable body must fail) o He described it as a trust. Not determinative in itself, but, at the least, this is not in the form of a gift to the members. o Members of the Order were spread out over the world. It's not easy to see testator as having intended an immediate beneficial gift to each and every one of these o Also note the subject-matter of the gift - a grazing property with a furnished homestead. Simply doesn't seem plausible that he intended this as a gift individually to every member of the Order. o We don't know about the rules worldwide of this order, but can at least doubt that in all of them the members have capacity to dissolve the association and distribute the assets So, clearly there was an intention was to create a trust, for the benefit of the Order and to further its work. His stated intention was that "the gift is to be an endowment of the society to be held as an endowment" and that "as the society is according to its form perpetual", the gift must fail if it's too a charitable body.

The following case shows the different ways in which courts have tried to give effect to such transfers; and here, goes for charitable trust:

Neville Estates v Madden [1962]
Facts: The claimants sought a declaration that they were entitled to the proceeds of a contract for sale of land owned by the Catford synagogue. The synagogue claimed that consent of the Charity Commission was required Cross J:
 Refers to Leahy and says that a gift for an unincorporated association may take effect in 3 different ways: o It may be a gift to the association's members on the relevant date as joint tenants, so that any member can sever his share and claim it, whether or not he continues to be a member of the association. o It may be a gift to existing members not as JTs, but subject to their respective contractual rights and liabilities towards one another as members of the association.
 Here, a member can't sever his share. It will accrue to other members on his death / resignation, even if these are people who became members after the gift took effect.
 If this is the effect of the gift, it will be open to objection on basis of perpetuity or uncertainty, unless there's something in its terms, or the circumstances, or the rules of the association, which precludes the members at any time from dividing the subject of the gift between them on the basis that they're solely entitled to it in equity.
 Note that here, even if the objects of the association are charitable, the gift wouldn't be a "charitable gift" - since the idea is that it'd be part of the contract between them that, if, say, a majority of members so desire, the association is dissolved, its property will divided between them (i.e. not to charity…). o The terms or circumstances or the rules of the association may show that the property isn't to be at the disposal of the members, but to be held in trust for, or applied for purposes of, association as a quasi-corporate body
 This will fail unless the association is a charitable body

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Here, he doesn't think that "members of a body of this sort envisaged for a moment that its property can legally be divided between the members for the time being." It was therefore held to be a charitable trust

Analysis: three key analyses therefore emerge from this case:
 Gift analysis: transfer to members in their personal capacity can take effect: literally as a set of transfers to the members, or, probably easier, as a transfer for treasurer on trust for members
 Contract analysis: absolute transfer to the members, literally or a transfer to treasurer on trust for members (like gift analysis). But then that's subject to contract (consisting of the association's rules) between members requiring them to leave their shares with the treasurer to comprise the association's funds, and so to be spent on association's purposes.

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Contractual analysis Re Recher [1972]
Facts: a testamentary gift was made to an anti-vivisection society, which was unincorporated with ordinary and life members and a constitution. The society had real political objectives, so the money could not be held for charitable purposes. Brightman J: this was a gift to members at the time of testator's death, but subject to a contract between them which took effect in favour of the existing members as an accretion of the funds that were the subject matter of the contract between all of the members, including those who would join in the future.
 It's not a gift to the members as of date of death so as to entitle a member to a distributive share; nor an attempted gift to present and future members beneficially; nor a gift in trust for purposes of the society. So is it capable of taking effect in any other way?
 A trust for non-charitable purposes is clearly void. But that doesn't stop people banding together as an association, paying subscriptions and donating their money in pursuit of a lawful non-charitable purpose. o E.g. a members' social club. o But it's not essential that the members should only intend to secure advantages to themselves.
 But if you do have an association where the funds go not to members' advantage but to some other goal, this association "is bound... to have some sort of constitution; that is to say, the rights and liabilities of the members of the association would inevitably depend upon some form of contract inter se, usually evidenced by a set of rules."
 Here, there clearly seemed to be a contract between members and "any... member was entitled to the rights and subject to the liabilities defined by the rules. If the committee acted contrary to the rules, an individual member would be entitled to take proceedings in the courts to compel observance of the rules or to recover damages for any loss he had suffered as a result of the breach of contract."
 And just like in any contract, it must follow that the members of the society could, by unanimous agreement (or majority vote, if that's what the rules say), vary or terminate the contract.
 There's no trust for charitable purposes, or private trust, or any other trust, which can hinder this - no one would have any standing to stop them from dissolving the society and dividing the money between them
 "In the absence of words which purport to impose a trust, the legacy is a gift to the members beneficially, not as joint tenants or tenants in common so as to entitle each member to an immediate distributive shares, but as an accretion to the funds which are the subject matter of the contract which the members have made inter se."

Note that in this case, unlike e.g. Lipinski, the property can't be construed as intended to be held on trust. It will still, however, typically be held by the treasurer in accordance with the contractual rules of the association NB, unincorporated associations are of very different sizes. When they're small, there's likely to be only one class of member, so when you dissolve it and divide up the money, all members will be treated alike. But larger ones are likely to have different classes of member, so if property is sold, it will be necessary to determine whether all members should share in the proceeds of sale. Re Lipinski [1976]
Facts: a testator had left part of his estate on trust for the Hull Judeans (Maccabi) Association, to build and improve new buildings for the benefit of the land. An unincorporated association, existed to promote the participation of Anglo-Jewish youth in sport, cultural and communal activities, and to inculcate good citizenship and self- discipline, and to cultivate an interest in Hebrew, Jewish history and traditions. Oliver J: there was a valid trust for the members of the Association — on the contractual analysis
 At first sight, there seems to be difficulty in arguing that the gift is to members of the association subject to their contractual rights inter se, given that there's a specific direction as to how the money is to be spent, i.e. as to the subject of the gift. So, it was argued that this created a non-charitable purpose trust, which was therefore invalid.
 Oliver, however, doesn't think it's enough just to demonstrate that this was a 'purpose trust': "If a valid gift may be made to an unincorporated body as a simple accretion to the funds which are the subject matter of the contract which the members have made inter se…I do not really see why such a gift, which specifies a purpose which is within the powers of the association and of which the members of the association are the beneficiaries, should fail"
 In such circumstances, why can't beneficiaries enforce the trust, or, in the exercise of their contractual rights, terminate it for their own benefit? "Where the donee association is itself the beneficiary of the prescribed purpose, there seems to me to be the strongest argument in common sense for saying that the gift should be construed as an absolute one within the second category [under Neville estates] — the more so where, if the purpose is carried out, the members can by appropriate action vest the resulting property in themselves, for here the trustees and the beneficiaries are the same persons." D+V:
 It follows that the terms of the association's constitution will be incorporated into the trust to enable members to enforce or terminate it by terminating the association, so that the members can then take trust property for themselves.

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